While facing short-term challenges such as a difficult financing context, the wind sector's fundamental economics should ensure its bright outlook over the longer term, argues Christian Kjaer of the European Wind Energy Association (EWEA).

With a background in journalism, economics and policy development, EWEA's CEO has welded the organisation into an effective lobbying group backed by rigorous research. For the wind sector, he now expects the next five years could be challenging, although he remains upbeat over its prospects in the long run.

WT: What do you think has made this industry pretty robust in the face of challenging economic circumstances?

CK: We're increasingly competitive. We're at a point now where we can actually offer a product at the same cost per kilowatt-hour for a new power plant as a new coal or gas-fired plant. With the current costs of gas in the US as an exception, wind power can compete and deliver electricity at the same cost. And it's a choice that hedges against future fuel and carbon prices.

Long term, that's the most attractive nature of wind energy. We're not competitive if oil prices go back to US$20 a barrel. But if they go to $150 or stay at $125, we are. We cost less than half the price of a new nuclear power plant.

WT: What are the challenges in the short term?

CK: Access to and cost of capital and infrastructure grids. The next five years may challenge us. What did the banks do in the financial crisis of 2008? They shortened the maturity of loans and they increased risk premiums. So basically it means that the wind industry or any other industry that needs capital to make investments has not benefited from the very low interest rates in the economy.

The good news is that new avenues are opening up in terms of financing. We need long-term financing and, of course, lower risk premiums. What the industry is increasingly trying to do is to match the long-term assets that we are building with companies that have long-term liabilities such as insurance companies or pension companies.

That's a much better match but it requires two things. It requires us as a sector to do much more in terms of educating those institutions about the technologies and risks. The other element is that the decision on whether they invest or not crucially depends on the political risk of an investment. We are paying way too much for the political risk that comes out of these retroactive changes.

WT: What about international influences on manufacturing?

CK: The European company's competitor - and I assume the Chinese's, the Americans' and the Koreans' as well - it's gas and coal for electricity production. Pressure from other competitors is good because it keeps us lean and if we're lean we can take on the competitor much earlier and better. A manufacturer might be able to build cheaper in China but once shipped to Europe it's going to be significantly more expensive than the one built in Germany. The alternative is coming to Europe and building wind turbines. That's not a scary scenario: it creates jobs. Two thirds of the wind turbine is sub-supplied and happens outside of the manufacturer. If companies come to Europe, they're going to use a large amount of European components.

What we crucially need in the wind industry is for that trade to be open and I'm very concerned about the protection that always comes when you have an economic crisis, and countries turn protectionist. We would like fairer market access to many markets.

WT: How can wind address integration?

CK: Infrastructure needs to be much better integrated because that's a precondition for competition to work. We want to compete. We have a very cost competitive technology but we can't prove it unless competition works and it doesn't. We need market reform. The main message is you can really use wind energy to create jobs and economic activities. What wind can do is create jobs. We need to address the affordability and shortage of capital. We need to figure out how can we mobilise capital to make the necessary investments to create the jobs to take the European economies back on track.

Image: Wind turbine via Shutterstock